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This doesn’t make any sense. The U.S. Government authorizes the Fed to create money out of thin air, which it will then use to buy up the debt of the U.S. Government that nobody else wants?
Is anyone who is currently holding U.S. Treasuries even reading the news? The auctions are going to fail, so the debtor is just going to snap his fingers and create the money to buy the debt that nobody else wanted to buy?
How does the dollar not collapse on this?
The Bloomberg piece focuses on similarities between monetary policies in the U.S. and Japan, and highlights a couple, “Bernanke-San,” references, but there’s just one tiny fact that the article doesn’t mention. Japan is the third largest creditor in the world. Where does the U.S. rank, on the current accounts balance list? Scroll down. Keep going. More. Down. Down. Until it stops. That’s right. Out of 164 countries on the list, the U.S. is dead effing last, meaning that it is the largest debtor in the world.
And the U.S. Federal Reserve is going to start buying U.S. Treasuries?
Bernanke yesterday said he may use less conventional policies, such as buying Treasury securities, to revive the economy, because his room to lower the main U.S. rate from the current 1 percent level is “obviously limited.” Even so, reducing the rate is “certainly feasible,” he said.
One option is for the Fed to buy “longer-term Treasury or agency securities on the open market in substantial quantities,” Bernanke said. “This approach might influence the yields on these securities, thus helping to spur aggregate demand.”
Should purchases of Treasuries fail to accomplish the Fed’s goals, “there’s very much a likelihood that they could expand the range of assets that they buy,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors, in an interview with Bloomberg Television.
Last week, the Fed announced two new programs aimed at unfreezing credit for homebuyers, consumers and small businesses. Those include a commitment to buy as much as $600 billion of debt issued or backed by government-chartered housing-finance companies and a $200 billion initiative to support consumer and small-business loans.
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“Capitalism is not about propping up failed companies, we need to let them fail,” said Schiff, before adding, “Now of course behind it all is the Federal Reserve, if the Federal Reserve had not intervened….had they not poured all this alcohol then Wall Street wouldn’t have got drunk, but they did.”
“I am convinced that everything the government is doing to fight this off is gonna make….” said Schiff before the feed was cut.